The British overseas territory of Gibraltar is set to regulate the booming blockchain industry – next month it will issue the world’s first license to fintech firms which are working on the development of distributed ledger technology.
This will attract blockchain firms to the peninsula, as the presence of regulatory rules will ensure their security.
At present blockchain-based firms are emerging all around the world but no countries are acknowledging them with specific legislation. So firms have to find some loophole in the rule book and registering as a firm in some other sector.
For example, in Japan, cryptocurrency exchanges are registered as e-commerce firms, and traders are considered customers.
Operating in such a manner is risky as the government may crack down on the firms at any time, citing any reason. This has already happened in China, where the government banned all cryptocurrency exchanges within its borders.
Countries like the US and Japan have specific rules regarding cryptocurrency exchanges, but none of them regulate the industry.
On Friday, the Gibraltar Financial Services Commission (GFSC) will publish a detailed guideline describing the laws applicable to all blockchain-based firms within the territory. These new laws will come into effect from January 1st, 2018.
As quoted by Reuters, the GFSC’s head of risk and innovation, Nicky Gomez, said: “This is the first instance of a purpose-built legislative framework for businesses that use blockchain or distributed ledger technology.”
“Many firms have been craving for a jurisdiction to regulate them,” Mr. Gomez added.
Blockchain technology has huge potential to revolutionize the financial sector. Banks all over the world are researching the feasibility of integrating the nascent technology into their infrastructures.
New York-based blockchain startup R3 has partnered with over 100 banks and financial institutions across the world to research and develop its own blockchain, called ‘Corda’, to ease the worldwide financial services.
Banks in South Korea and Japan also partnered with US blockchain-development firm Ripple to test the cross-border payment system.
With all these advancements, Mr. Gomez is expects that blockchain firms, probably numbering in the double digits, will seek the authorization of the regulated jurisdiction.
Sian Jones, a senior advisor to the Gibraltar government and regulator on DLT, said: “We have been talking with law firms and advisors helping companies to get established here,” according to Reuters.